Microsoft Considers Vista Discounts

Microsoft Corp. is considering discounts or other promotions during the holidays
to entice consumers to upgrade their PCs with Windows Vista, even though the
new operating system isn't due to hit store shelves until January at the earliest.

Any end-of-the-year effort to spur PC purchases would likely please many retailers
and computer manufacturers, who fear disappointing sales during the crucial
holiday as consumers wait for the highly anticipated and long-delayed software.

Kevin Kutz, a director in Microsoft's Windows Client Group, confirmed Tuesday
that the company is in talks with PC makers and retailers about a range of possible
holiday promotions. But he declined to offer other details, such as whether
they would apply only to new purchases.

Vista will be the first major upgrade to Microsoft's flagship operating system
since Windows XP was released in 2001. After a series of delays, Microsoft said
it appears to be on track to ship the business version of Vista in November
and to consumers in January.

Last month, however, Kevin Johnson, co-president of the Microsoft division
that includes Windows, said the company would not hesitate to delay Vista again
if it has any concerns about product quality.

George Shiffler, research director at Gartner Group, revised his PC sales forecast
for 2006 after Microsoft announced its latest Vista delay in March. He said
he expects about 1.1 million fewer units to be sold worldwide than previously
forecast.

Shiffler isn't expecting Microsoft to make the January release date. He notes
that it usually takes Microsoft nine months to a year to ship the final product
after its second "beta," or test, release. Vista Beta 2 came out in
May.

He suggested some PC makers might be hoping for another delay, because marketing
an operating system that doesn't exist yet is a formidable challenge they'd
rather skip.

Instead, he thinks they'd rather wait for holiday and Super Bowl media distractions
to end before trying to get customers excited about a new PC.

Microsoft's initial goal for the consumer market "was to get Vista-powered
machines, new chips, Intel processors _ have the whole thing come together in
time for Christmas," said Ted Schadler, an industry analyst for Forrester
Research Inc.

Steven Baker, vice president of industry analysis for NPD Group questioned
whether any Vista promotion would work before consumers can actually buy it.

"The issue isn't that people don't want to buy a new PC ahead of a new
operating system," Baker said. "People don't want to install a new
operating system on a new PC."